# Approaching market sizing

Case estimation Market sizing
New answer on Aug 01, 2019
1.4 k Views

Hi All,

I understand that with market sizing questions you're supposed to lay out your structure in a tree first and then do the calculations afterwards. You're supposed to start from the top of the tree (e.g. total market size for balloons in the US) and eventually work down to something like population.

All the tutorials I've seen online are people starting from population, segmenting, and then working their way upwards towards the final answer.

Which is the best way to break down a problem?

• Date ascending
• Date descending

Hi,

There are 2 ways to structure market sizing:

• Formula - basically a math formula to come up with a solution. The problem with the formula is that it is easy to forget something or get lost.
• Tree - same as with regular cases you build a tree. A very simple example: you need to calculate the number of dogs on manhattan. A number of dogs = share of households having a dog * # of households. # of households = population / average household size. In the end, you'll have a pyramid where you have to fill the numbers on the base of the pyramid. This approach is much easier and help you track all the numbers so I personally recommend using this one.

2) You should learn the key market sizing techniques:

• Making assumptions based on personal experiences (Use the example of your house where out of 100 apt-s 10 have dogs)
• Adjusting numbers (NY is a busy city thus fewer people have dogs)
• Sanity check - try to apply your calculations to the real environment
• etc.

3) You should learn the key tools:

• Using age even age split (suppose life expectancy is 80 years. Assuming even age split we have 4 mln people in US of each age)
• Using 80/20 split (suppose 20% people earn 80% wealth and the average salary is xx...)
• Using approximations (Length of NY-SF flight and plane speed to calculate US length)
• etc.

4) Learn key numbers: populations, gas price, gas consumption, Boeing speed and number of seats, average salary, # of gates in the airport, GDP growth rate, inflation, etc.

5) Practice 10-15 cases and you'll be fine. Almost all casebooks have good market sizing examples and the solutions

Feel free to PM for clarifications

Good Luck!

For your tree method - I seen you've started from the top, rather than from population. A lot of people I see segment from population and talk their way up. Isn't that the method that is easier to follow?

That's what I'm saying - you start from the top in order not to miss anything and make a structure. Once the structure is done - you start filling the bottom level from population

(edited)